Cost and Value Management in Projects provides practicing managers with a thorough understanding of the various dimensions of cost and value in projects, along with the factors that impact them, and the managerial approaches that would be most effective for achieving cost efficiency and value optimization. This book addresses cost from a strategic perspective, offering thorough coverage of the various elements of value management such as value planning, value engineering and value analysis from the perspective of projects.

1 Introduction to the Challenge of Cost and Value Management in Projects 1

1.1 Importance of Cost and Value Management in Projects 2

1.2 Keys to Effective Project Cost Management 6

1.3 Essential Features of Project Value Management 8

1.4 Organization of the Book 9

References 14

2 Project Needs Assessment, Concept Development, and Planning 17

2.1 Needs Identification 19

2.2 Conceptual Development 22

2.3 The Statement of Work 23

2.4 Project Planning 27

2.5 Project Scope Definition 28

2.5.1 Purpose of the Scope Definition Document 29

2.5.2 Elements of the Scope Definition Document 29

2.5.3 Project Scope Changes 30

2.6 Work Breakdown Structure 32

2.6.1 Types of Work Breakdown Structures 34

2.6.2 Work Breakdown Structure Development 35

2.6.3 Coding of Work Breakdown Structures 38

2.6.4 Integrating the WBS and the Organization 38

2.6.5 Guidelines for Developing a Work Breakdown

Structure 42

References 42

3 Cost Estimation 43

3.1 Importance of Cost Estimation 44

3.2 Problems of Cost Estimation 45

3.3 Sources and Categories of Project Costs 49

3.4 Cost Estimating Methods 51

3.5 Cost Estimation Process 56

3.5.1 Creating the Detailed Estimate 56

3.6 Allowances for Contingencies in Cost Estimation 59

3.7 The Use of Learning Curves in Cost Estimation 61

References 64

Appendix 67

4 Project Budgeting 83

4.1 Issues in Project Budgeting 83

4.2 Developing a Project Budget 85

4.2.1 Issues in Creating a Project Budget 85

4.3 Approaches to Developing a Project Budget 85

4.3.1 Top-down Budgeting 86

Top-down Budgeting: Advantages 86

Top-down Budgeting: Disadvantages 87

4.3.2 Bottom-up Budgeting 88

Bottom-up Budgeting: Advantages 89

Bottom-up Budgeting: Disadvantages 90

4.4 Activity-based Costing 90

4.4.1 Steps in Activity-based Costing 90

4.4.2 Cost Drivers in Activity-based Costing 91

4.4.3 Sample Project Budget 1 91

4.4.4 Sample Project Budget 2 92

4.5 Program Budgeting 93

4.5.1 Time-phased Budgets 93

4.5.2 Tracking Chart 94

4.6 Developing a Project Contingency Budget 95

4.6.1 Allocation of Contingency Funds 95

4.6.2 Drawbacks of Contingency Funding 96

4.6.3 Advantages of Contingency Funding 97

4.7 Issues in Budget Development 98

4.8 Crashing the Project: Budget Effects 99

Crashing Project Activities?Decision Making 100

References 104

5 Project Cost Control 105

5.1 Overview of the Project Evaluation and Control System 105

5.1.1 Project Control Process 106

5.2 Integrating Cost and Time in Monitoring Project Performance: The S-Curve 107